Venezuelan Hyperinflation: The Spiral To The Bottom, Now It Begins

I wrote a piece Friday about hyperinflation. In it some articles were referenced as reading that explains how commodity pricing interacts with hyperinflation. Venezuela has crossed into the twilight zone. A place that if it weren’t for Paul Volker and his hyperinflation choking money policy prevented, would have likely led Jimmy Cart’s economy over the hyperinflation cliff… For the first six months of 2010 inflation in Venezuela was a little under 30%, so you can see where that is headed. LAHT has the story:

The Venezuelan government announced its authorization for price hikes of between 26-29 percent at the production stage for some cereals in order to “stimulate” the planting of those crops in the next agricultural season.

The increase was proposed to President Hugo Chavez, who “authorized the adaptation of prices” of rice, corn and sunflower seed, which took effect on Sept. 1, Vice President Elias Jaua said.

Jaua said that the price of a kilo of Paddy A rice will go from 1.20 to 1.55 bolivars (36 cents), and the Paddy B from 1.19 to 1.24 bolivars (28 cents), which represents an increase of 29 percent in both cases.

A kilo of white corn goes from 0.90 to 1.15 bolivars (26 cents) and yellow corn from 0.80 to 1.02 bolivars (23 cents), the vice president said.

In the case of sunflower seed, whose production “we have been recuperating,” Jaua said, the price increase was 26 percent, rising from 2.10 to 2.64 bolivars a kilo.

In Venezuela price controls have been in force since 2003 for about 100 products considered to be basic necessities, as a mechanism to combat speculation on commodities, according to the official position.

The country experiences cyclical scarcity of food and other basic products, which the private sector blames chiefly on the price and exchange controls that have been in force for the last seven years.

Here are my original article.

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